Grazer Learning Ltd sub-contracted the creation of an innovative platform that matched customers with digital learning providers. But when HMRC questioned their R&D claim, they failed to provide sufficient evidence in the initial enquiry.
What happened?
Grazer Learning Ltd (‘Grazer Learning’) matches customers with digital learning providers. It sub-contracted the creation of an innovative platform that would uniquely match the customer to the content through the customer's prior experience and individual learning goals.
The platform introduced a novel multi-pathway approach to identify an individual’s most appropriate learning pathway. HMRC queried whether a technological advancement was being sought, and therefore opened an enquiry. Grazer Learning failed to arrange for the ‘competent professional’ working on the project to give evidence in the initial HMRC enquiry and, as such, HMRC sought to re-claim the paid tax credit. Grazer Learning appealed and the case made its way to tribunal.
The question before the tribunal was essentially whether the expenditure incurred on the platform was done so to resolve a scientific or technological uncertainty, or merely resulted from a novel use of existing technology.
The outcome
FTT found the taxpayer could not establish that expenditure was incurred in resolving a technological uncertainty and achieving an advance in science and technology.
The tribunal had directed the taxpayer to provide HMRC with any witness statements as evidence to support their appeal, by December 2020. However, they had not done so – they had provided one witness statement to the tribunal, but not to HMRC, in April 2021, and three further witness statements to the tribunal (but not to HMRC), three days before the hearing in September 2021. Because of this, the late evidence was rejected, and the appeal against the R&D tax credit being disallowed was dismissed.
“…the Appellant had failed to establish on the balance of probabilities that the activity involved a project seeking to achieve a technological advance through the resolution of a technological uncertainty – appeal dismissed.”
Case take away
You are asking for trouble if you do not provide evidence to support your claim. In this case, whether the work undertaken was R&D or not is almost irrelevant. As no evidence was provided on time, the FTT had no option but to dismiss the appeal.
Also, just because HMRC has paid out a claim doesn’t mean that a company is out of the woods. So long as the enquiry window is still open, HMRC can go back and revisit claims.
If you need any help with R&D tax relief, please contact us.